Question
Guzman Inc. operates the Home Appliance Division as a profit center. Operating data for this division for the year ended December 31, 2017, are shown
Guzman Inc. operates the Home Appliance Division as a profit center. Operating data for this division for the year ended December 31, 2017, are shown on the next page.
|
| Budget |
| Difference from Budget |
Sales |
| $2,400,000 |
| $90,000 U |
Cost of goods sold |
|
|
|
|
Variable |
| 1,200,000 |
| 58,000 U |
Controllable fixed |
| 200,000 |
| 8,000 F |
Selling and administrative |
|
|
|
|
Variable |
| 240,000 |
| 8,000 F |
Controllable fixed |
| 60,000 |
| 3,000 U |
Noncontrollable fixed costs |
| 50,000 |
| 2,000 U |
|
|
|
|
|
In addition, Guzman incurs $150,000 of indirect fixed costs that were budgeted at $155,000. Twenty percent (20%) of these costs are allocated to the Home Appliance Division. None of these costs are controllable by the division manager.
Instructions
(a) Prepare a responsibility report for the Home Appliance Division (a profit center) for the year.
(b) Comment on the managers performance in controlling revenues and costs.
(c) Identify any costs excluded from the responsibility report and explain why they were excluded.
(a) Responsibility Report
For the Year Ended December 31, 2017
| Budget | Actual | Favorable F Unfavorable U |
Sales | 2,400,000 | 2,310,000 | 90,000 U |
Variable Costs: | |||
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Total |
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Contribution Margin |
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Controllable Fixed Costs: | |||
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Total |
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Controllable Margin |
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(b) Two costs are excluded from the report are:
(1) _____________________________________
(2) _____________________________________
The reason that they are excluded is: ____________________________________________
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